Managing projects effectively, and profitably, is the life blood of consulting firms. Successful projects rely on every stage of their lifecycle going to plan. From securing the initial win, to managing project scope and documentation and delivering on time and at a profit. In an industry that relies so heavily on client relationships, consulting firms must track and assess performance every stage of the project and see what’s working well and what’s not. In this blog, we are looking at 5 areas to focus on that will help you achieve long term profitability from better project delivery.
Bid to Win Ratio
Your bid-to-win ratio is a crucial key performance indicator (KPI) for assessing the effectiveness of your sales and marketing, and how many net new projects are entering your books.
Research from Forrester Consulting shows that only 9% of project firm leaders have won 75% or more of their project bids, with around half (49%) reporting they only ever win 25-50%. In other words, 61% experience an engagement win rate of less than 50%. Not just a disappointing statistic, but a waste of sales’ efforts in pursuing the wrong opportunities and, in many cases, pitching blind.
To overcome this worrying trend, consulting firms are advised to analyse their historical performance data to pinpoint which areas they need to address to improve their win rate – whether that’s more thorough deal qualification, increased reference selling or better positioning to target the right markets and clients.
Project Information Management
Having a handle on your project information - including emails, contracts, schedules, drawings and other documentation - can make all the difference to successful project delivery. Disparate systems, information silos and different ways of working by teams and individuals can all be damaging to the success of your projects. Without formal processes and systems in place the efficiency and collaboration within project teams can be compromised.
In order to have a full and accurate picture of the progress and performance of your projects, and business as a whole, you need to have access to the right information. If there are gaps due to lost documentation and information silos; compounded by a lack of project information management strategy and systems, there will be gaps in your knowledge.
Enterprise information management tools are an effective way of moving project management beyond simply setting tasks, resources and budgets to ensuring everyone stays in the loop with all project-related communications.
In today’s world, people are, more open than ever to opportunities outside their existing employment. In fact, research from CareerBuilder suggests that by age 35, a quarter of workers have held five jobs or more. Smart companies know that one of their greatest resources is their people, particularly for those who work in the knowledge economy of professional services. Retaining first-rate staff can be key to success and integral to growth.
People choose to move on for a variety of reasons. These include not feeling properly compensated, valued or rewarded, or suffering from stagnation and a lack of opportunity to develop their career within your company. According to Oxford Economics research, replacing talent costs UK businesses over £4billion per year. With firms spending so much on recruitment, it can be safe to assume that staff retention is a big problem for many. To avoid losing talent, your best bet is to create an employee retention strategy. It will require investment, but when you add up all the hidden costs of replacing staff, can you really afford not to have one? Taking this approach will mean firms are in a position to create talent-focused development strategies that will improve employee retention and resonate with key objectives for profitability and growth.
Managing finances is a critical aspect of project delivery. To forecast and manage costs accurately, you need to understand both past and current performance.
Collating information from as many historical projects as possible will give you deeper insights into where mistakes are being made or where there is a lack of commercial focus. You should also implement a set of KPIs that will help you better manage business performance in the future.
Looking back at your data is a good start but you also need instant access to current project costs in order to maximise profitability. Without full visibility how do you know if your client billing is accurate, invoices are out the door and being paid, or that management reports include up-to-date measures of project profitability, utilisation and efficiency? If your sales, services and finance systems aren’t aligned, it’s impossible to gain visibility and control over the end-to-end project lifecycle. Only with a clear view of your project costs will you be able to manage projects efficiently and improve working capital.
Measuring Project Success
Measuring project KPIs encourages best practice throughout your firm. Helping teams to monitor and report on their KPIs creates transparency across the business and encourages accountability. Some of these key KPIs include Project Schedule Variance, Days Sales Outstanding (DSO), Customer Lifetime Value, and Deal Close Ratio. According to the 2017 Professional Services Maturity Benchmark Report from Service Performance Insight, DSO is 23% lower per year for the top professional services firms. These top-performing firms constantly keep track of performance throughout their whole project lifecycle.
Delivering Profitable Projects
To deliver profitable projects, your whole firm must get involved. You need to employ the best people and invest in them, constantly monitor and improve service delivery and effectively manage your finances. With these internal processes and constant improvements, you will be able to produce the best work, keep customer satisfaction and client retention levels high and, ultimately, maintain good levels of profitability.
Deltek has created a best practice library with a broad range tips to ensure all corners of your business are united to deliver successful projects.